CAP 2013 – We need strong leadership not backroom haggling

In the latest in a series of exclusive articles for Endeavour Public Affairs about the rural economy and the 2013 reforms of the Common Agricultural Policy, Sir Jim Paice MP writes that a long term plan to phase out direct payments across the whole EU and switch some of the funding into pillar two remains the best, though most unlikely, outcome of CAP reform.

Sir Jim is the Conservative MP for South East Cambridgeshire and has a strong background in agriculture and farming. Prior to the 2010 General Election he was Shadow Minister for Agriculture and Rural Affairs. Following the 2010 General Election and up until the recent cabinet reshuffle, he served as Minister of State for Agriculture and Food in the Coalition Government.

The failure of EU heads of state to reach agreement on the budget for the next seven years almost certainly means that, as we have long expected, the CAP process will not be completed in time for a start on January 01 2014. That in itself means further uncertainty for UK farmers who want to plan ahead, especially as the whole ‘greening’ issue is unresolved. It also means more time for the Treasury to press for cuts to the CAP.

I have believed for over 20 years that direct support for farmers will and should end eventually; already in England it is now completely separate from units of production. The Coalition Government inherited a policy that all direct support should stop immediately, a ludicrous position to adopt; it is unachievable and cuts the UK out of serious debate at the Council of Ministers. It would also destroy a large part of UK agriculture if it had no time to adapt. Despite Treasury pressure, for the last two years Ministers have been arguing more realistically for a programme to phase out direct payments. It got us back into the debate but recent rhetoric suggests the Government is reverting to the old position. It must be remembered that last time around this course Tony Blair made great play of wanting to cut spending on the CAP only to be stitched up by Jaques Chirac with a cut to the best bit of the CAP (pillar two which funds the rural development programme including environmental measures) and funding for the environment.

It is critical that David Cameron does not allow a cut to pillar two especially as the UK gets a poor share of it anyway. The Treasury will see it differently and will welcome any cut, at least until DEFRA asks for funding to continue the stewardship schemes whereby farmers are paid for specific environmental measures for which there is no market (the so-called ‘public goods’). The reality is that DEFRA already has an ongoing commitment in the order of £2 billion for existing stewardship schemes even if no more are started. Although Natural England have started going slow on new approvals, it would be unacceptable for all sides for no new schemes at all to be started. Nonetheless, the challenge for DEFRA to keep the schemes going for new approvals through the next seven years is daunting. That is why it essential to get the Commission to agree that a farmer who is in such a scheme automatically complies with whatever comes out of the ‘greening’ proposals. This would mean that funding for the entry level scheme would be shifted to pillar one and make a huge difference to the funding challenge. Not all farmers will like it but it is the least worst option. Whatever happens our stewardship schemes are under pressure. Designed to recompense for income foregone, as required by EU law, they were based on grain prices in the order of £70-80 per tonne; a far cry from today’s figures of nearly three times that level. So many farmers will be tempted to quit schemes especially if they lose money through participation.

A long term plan to phase out direct payments across the whole EU and switch some of the funding into pillar two remains the best, though most unlikely, outcome of CAP reform. It would allow Member States to use their pillar two funds not just for the environment, important as it is, but also to assist the restructuring of small scale farming and help their industries adapt to a world without direct payments. As it is we will end up with a reduction in payments for some Member States, an increase in others and nothing to help the industry face up to the challenge of feeding an increasing global population which demands more and better food. In seven years time the debate will be the same, a sterile argument about propping up small farmers and the need to keep direct payments which will inevitably decline further.

The fact is that the CAP cannot meet the challenges which are now coming – and the EU shows little understanding of the opportunity which the present reform presents. It is not too late but it requires clear and strong leadership, not backroom haggling.

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